Kershaw’s Texas Home Saves Dodgers Pitcher Millions in Taxes
While Clayton Kershaw wears Dodger blue, he’ll keep more green by remaining a Texas resident, according to Robert Raiola, a certified public accountant who specializes in sports and entertainment.
Kershaw, who won the National League Cy Young Award two of the past three seasons, signed a seven-year, $215 million contract with the Los Angeles Dodgers. It’s the richest contract for a pitcher in Major League Baseball history, eclipsing the seven-year, $180 million deal the Detroit Tigers gave pitcher Justin Verlander last offseason.
As a resident of Texas, which has no state income tax, the 25-year-old left-hander will pocket about $1 million more annually than if he lived in California, Raiola said, adding that the state’s 13.3 percent income tax is the highest in the U.S.
The contract includes an $18 million signing bonus, payable immediately, according to a person with direct knowledge of the agreement.
Raiola said his calculations assume that 49 percent of Kershaw’s games will be subjected to California tax. He assumed a state tax rate of 7 percent in other locations where athletes are subject to tax.
As a Texas resident, Kershaw will pay about $15.5 million in nonresident taxes, Raiola said. As a California resident, he would have paid about $26.2 million over the life of the Dallas native’s agreement, said Raiola, the sports and entertainment senior group manager in the Cranford, New Jersey, office of O’Connor Davies, LLP.
Overall, as a Texas resident, Kershaw will keep about $108.2 million. Had he lived in California, he would have kept about $101.7, a difference of about $6.5 million over the seven years.
The calculations also included a 5 percent agent fee. Kershaw is represented by Casey Close of Excel Sports Management, whose clients include Kershaw’s teammate Zack Greinke and Derek Jeter of the New York Yankees.
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